Do Zero Based Budgets on Focus on Short Term Goals?

Posted on October 29, 2015 By

Zero based budgets can be a great way to beat the sawdust out of a budget.  The principles of zero based budgeting are pretty simple.  Each year or month that you prepare a budget, start with zero information.  Starting with zero information, instead of using comparables from previous months or years, forces the preparer to be savvy and understand the true basis of their budget.

Cons:

  • Important historical information might be ignored.
  • Labor intensive.
  • Can be short sighted.

Pros:

  • Shakes the saw dust out the budget.
  • Short term budgeting can make companies more focused.
  • Flexible budgeting, since less historical information is used.
  • Encourages new projects.  Because new projects are on equal footing with old projects, they will have a better chance of being included.

In any budgeting scenario, a manager can manipulate the numbers to suit the story or to get upper management approval.  For example if you know that the management team will decrease payroll budgets by 10%, it’s easy to inflate by 10% and get to the number that your department needs.

There are other year to year amounts that can also be eliminated.  Zero based budgeting does not do away with those budgeting problems.  It’s simply inherent in the management process or budget negotiation.

The main benefit is challenging all the yearly numbers and making it work.

What are other budget preparation methods?

  • I’ve seen people take last years actual results, average it out over 12 months and deem that the budget.
  • Incremental budgets.  (ie. increase everything by 10%)
  • Flexible budgets that adjust with sales or manufacturing volume.
  • Priority based budgets re-evaluate every project or cost, but management does not start from zero each time.

 

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Specific Goals!

Posted on October 26, 2015 By

When I meet with someone for the first time about their business, I ask, what is their goal?  Usually the answer is a smattering of life/work balance/ successful business/adequate funding.  However, that is not very specific.

In the past week I’ve talked to several people.  I’ve asked them all ‘how many hours they wanted to work on their business.’  Full time, they said.  What do you consider full time?  20 hours, 40 hours and 45 hours were the answers.

Why such disparity?

Everyone uses the same generic language to describe their goals.  However, the numbers behind those statements can vary widely.

Please, the next time that you work with a number cruncher be sure to exactly quantify what you mean by:

  • Successful
  • Double Sales
  • Increase 100%
  • Revenue Positive
  • Fully Staffed
  • Increase the Sales Funnel

Each of those terms can have widely variable actual numbers.  Save yourself some time and give some specifics some to the profession.  It does no good to have someone create a spreadsheet or model with non-specific goals.  Populating the roadmap with some goals will help ensure the financial model is specific to your business.

Remember, if you are working with a consultant, you aren’t giving a speech at the local toastmasters.  You are actually creating a business model that you be able to brag about at the toastmasters meeting.

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What is an Request for Proposal (RFP)?

Posted on October 14, 2015 By

A Request for Proposal (RFP) is a formal request for vendor bids to provide services or materials.  It might be for a governmental, business or non-profit organization that is requesting the vendor information and prices.  Why is it used?  It’s a great way to provide uniform information to all vendors.

What are the essential elements of a RFP?

  • Asking for a Quote for a Service or Product.
  • Clarity
  • Quantity
  • Time Frame
  • Deliverables
  • Intangibles
  • History
  • Background
  • Project Parameters
  • Contact information
  • Application Deadlines

Many governments, non-profits, and large companies use RFPs.  They serve an essential part of the vendor search process.  It’s a formal long form document that can clarify and describe the needed work.

It’s important to carefully read the contract requirements and contact information.  It’s possible there might be a prior approval need to apply for the RFP, the Request for Information (RFI), an approved vendor’s list, or be entered into a specific database.

Helpful hints in responding to RFPs.

  • Look at other awarded RFPs from that same government or entity for guidance
  • Describe the volume that you can provide
  • Mirror the same vocabulary.  Ex. DOD contracts use specific terminology.
  • Research anything that is not obvious.
  • Describe the effectiveness of your delivery, products or services.
  • Describe how those items will fulfill the RFP.  Be careful not to promise the moon.
  • Read blogs/articles from the government or entity.

Here are some helpful items that help you create an accurate quote:

  • Create a project management costing sheet to quantify the project.  Once the contract is signed, your profit and loss may be predetermined.
  • Know the difference between different shipping terms.
  • Know industry buzzwords.
  • Call the contract officer if you have any questions.
  • Add an adequate gross margin.
  • Know which expenses will be reimbursed and which will not.
  • Create an adequate labor structure costing model.
  • Accurately quote labor costs and hours
  • Determine profit margin and IRR

Let us know if you need help with this process.  We create an effective plan and response to RFPs.

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Future Capacity Building Planning

Posted on October 9, 2015 By

Rethinking the box we find ourselves in day and day out can be difficult.  Even exceptionally smart folks find themselves in a box.  Ask them how they are doing, and it couldn’t be better.  They actually enjoy working on moribund products, outdated computer systems, and making buggy whips.

An example is the world wide switching to cloud accounting.  It’s happening by fits and bits and perhaps should be ignored or glossed over by accounting professionals.  I mean, like Detroit is the only place that really knows how to build cars, isn’t it?

The race to cloud accounting by new business owners is even something Oracle is even taking notice of and they have their own cloud accounting services.  Intacct, Netsuite, Sage, Wave and others are converting new business owners like it’s cotton candy for the bottom line.

Are there other industries facing this same challenge?  Yes, if you can pack it in a box and mail it; there is pretty chance that large internet retailers are competing with you.

But what does that have to do with capacity building, you ask?

It’s about planning for an appropriate amount of capacity building in the appropriate direction.  It’s not enough expand the factory line by an additional 10,000 units.  You have to figure out the entire product life cycle and ponder how someone will hack the process.

In the last few months, there have been immensely popular kickstarters for calendars, note books, and other stationary items.  One note book declared itself revolutionary by having a small pen that lay flat on the notebook spine.  I might be imagining things, but those items look like products that you can buy at office depot.

Is there something that you are making/manufacturing that can be suddenly rebranded as revolutionary?

Okay, Laura, you are saying, you are getting carried away.  Nothing is going to damage my chinese suppliers shipping products by the millions to retailers.  There is no way.

Really?  What about 3D printers?  What would happen if someone could manufacture your product on the spot and skip the 45 day boat trip from China?  How safe would your million dollar investment in injection molds and equipment?

You can do all the math on your large computer network that uses three or four IT people to maintain, using the expensive ERP systems that you spent a million to install and program.

Or you can do some calculations on the cloud based Google Sheets, research innovative crowdfunding projects, visit some maker fairs and consider how these places might effect your industry.

You might be building capacity, but is the correct capacity?

  • Instead of injection molding, perhaps selling the raw materials for 3D printing.
  • Instead of cookie cutter dolls, people are now making action figures with custom faces.
  • Regular shipments of product crates, like beauty supplies, geeky stuff, organic food are immensely popular.

You do need to be careful, though, impossible innovation, that cheats the system or consumer safety rules can backfire.

Volkswagen manufacturing diesel cars that would adjust to emissions tests and then readjust to have more power when they were on the road.

Uber, Lyft and other taxi apps ignore important safety rules and regulations.  They require a newish car, which impoverished taxi drivers with poor credit may not be able to afford.  Or did you assume that Uber driver just happened to be driving around?  About half of ridesharing taxi drivers; are actually taxi drivers.  Who else is going to be looking for fares on a saturday night when the bars get out?

Adjusting to new realities does not mean trying to stuff things in a box that don’t fit. It means that you think about the process and streamline and eliminate extra cost.

Does that mean that drones will take over package delivery?  I think there are a whole host of technical problems, like driverless cars that need to be solved before that happens.  For example,

  • What happens when a drone doesn’t get a knock at the door?
  • How is the person supposed to know that a delivery is going to be made?
  • Does a drone flying around really use less fuel than a delivery driver?
  • What happens when the product is dropped by accident?
  • Is this going to be normal only in cities or will this be for rural deliveries as well?

The market pressures on clothing have been extreme.  Light weight, flimsy, poorly sewn seams and probably made in a sweatshop.  I’ve described most of the women’s clothes in malls.  I don’t even want to talk about the poor fabric that most craft stores stock.  Most of it looks good for quilting, but thin, thin, thin.  The clothing manufacturers are creating an opportunity for quality goods.

Think I’m wrong?

What about the emergence of quality shaving supplies for men vs the cheap disposable shavers?

Think about your products?  Are you building capacity based on the past or the future?

 

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Critical Path Management (CPM)

Posted on September 15, 2015 By

What is Critical Path Management (CPM)?  It’s an essential part of determining a project management timeline.  It was originally developed in the 1940’s and was implemented developed by the Manhatten project, Dupont and other large corporations.

The mathmatical equations have changed since it was created, however, the thought process and logic are essential.

A simple example is that you are building a house.  What do you do first?  Put on the roof?  Of course not!  Let’s start with the building permit approval.  The permit approval requires an environmental study, traffic study, and architectural plans.  How much time do those other activities take?

Here are some commonly used items that you need to complete a CPM.

  • A itemized list of all the needed activities. This needs to be more specific than ‘install floor’.  Install floor might be a main category, but what are the steps that are required to do that.  Measure, level and cut flooring might be subsections of that list.  If you have projects that are similar, consider creating a master file that has almost too many steps and then adjust it for each project.
  • How long each item on the list will take.  (example, installing a large tile floor requires one day of prepping the floor, one day of laying out the tile pattern, one day of installing tile, and one day of grouting.)
  • What are the bottlenecks or the dependencies that require one item to be finished before another is started. (example, new building construction requires the foundation to be laid before the walls are constructed.)
  • What are the endpoints or deliverables? Milestones are bit different than endpoints.  Milestones are substantial parts of the job that are completed.  (example, completed drywall completion)  Milestones are often project bottle necks. Endpoints are the completed project goal.  If it is a large project, the subprojects might be referred to as endpoints.

CPM then is used to calculate the longest completion path in the project. Start that process by finding all the critical items that need to happen without the project stopping.  The float items are those that can happen without the project happening.  By identifying your must haves or bottlenecks it helps determine the project length.  Adding up the critical path times will tell you the shortest path to completion.  It simply won’t be possible to complete the project without finishing those items.

I use the critical path to create a framework for fitting in the float items, or the tasks that do not create a block another project from happening.  Once you have a basic framework, you can make adjustments.  For example, trim work in the living room needs to be completed for all construction jobs.  However, using a prepainted trim package can keep it from being a non-critical path item for painting the living room.

If there is an item that requires time for something to start.  Say, a specialist that is only available on Mondays, the six days prior to that are float time.  These are potential delays that are foreseeable so you should plan for them.  If the action item is missed in it’s window, it is sometimes referred to as critical path drag.  If you miss the monday appointment, it will be a week before that time slot is available again.

For instance, I’m working on a grant request this week.  The grant is only open every two years.  If I miss the application deadline, it will be another two years before I can apply for that grant.

A parallel path are when there are two or more critical project paths.  The shorter paths are non-critical paths and do not contribute to the project length.

Resource leveling can also be added to the mix by adding the delivery times to resources that impact the project. This is especially critical in custom or one of a kind materials are dependent on third parties to deliver.  An example would be a custom iron wrought fence that is the focus of the driveway.  The customer does not believe this is completed until this elaborate gate is installed.  Resource leveling would be adding that requirement to the critical path.

There a number of different software programs that you can use to quantify the project.  I like project management software that is flexible and can provide a time budget, an estimated time to actual, and several different views of the project.  For instance a visual diagram of the project logic and an project list that can be downloaded or add labor estimates to for costing.   Here is a list of project management software programs on wikipedia. https://en.wikipedia.org/wiki/Comparison_of_project_management_software

Trello is an example of a simple project management software.  Many creatives, writers and software engineers use it to create a to do list for each project.

The goal is to move from educated guesses to a mathmatical equation.  Once you know which days the projects are likely to happen, it’s easier to schedule materials, employees, and subcontractors to show up. (Resource Leveling) The process should be laid out so that you know if the project time, labor or material delivery needs to be adjusted.  If you know a few weeks out that the final cleaning will need to be delayed a month or so, it’s a much smoother project flow.  Even if the project is delayed, at least your subs will be confident that the work site will be ready for them.

 

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Fixing a Website Problem

Posted on September 14, 2015 By

This weekend at about four in the morning I decided to check on a promotion that I was doing for another website. (www.paperbutterflyforge.com).  It’s getting towards christmas and the holiday shopping season and I wanted to see how the facebook advertising was going.

Doing that check resulted in about six hours of work when I figured out that my website was partially broken.  Some of the steps are pretty close to what you would do for any problem solving so let me go on a bit. 🙂

Step 1:  Determine the problem.  When people clicked from my facebook ad, the website did not show the product photo/listing.  It showed a blank white screen.  Heavens to betsy!  No one was going to scroll down to see my product pics!

Step 2:    I decided to ‘Test’ the problem.  Yup, it was working fine on the PC, but Mobile was not working.  There was definitely a problem that needed to be fixed.

Step 3:  It was a woo commerce website and they had issued warnings that the third party theme wasn’t compliant with their app any more.  I had ignored those warning because the website seemed to be working fine.

Step 4:  Determine my options.

  • Keep the same theme, damn the consequences.
  • Change the theme.
  • Complain on the theme’s support page.

Step 5: What would be the outcome of those options?

  • Facebook advertising would be non-productive.  Nope.
  • I would have reconfigure the theme.  Not a problem, I’ve gotten good at WordPress.
  • Hours of waiting for an answer.  Wordpress apps die all the time because they are created by small shops who give away their products for free.  Sometimes it’s not worth wading through the problems because they will NEVER solve the problem.

Step 6:  Make a decision.  I chose to change the theme to a default woo theme.  It’s not as pretty, but darn it, at least the mobile issue will be immediately fixed.

Step 7:  I tested it with every device, mobile, tablet and PC.

Resolution:

I still need to add more branding to the website and there are items that I didn’t like about the basic theme.  Woo does have some prettier themes for sale, but in the few short hours that I had to fix it, I didn’t feel I could make a fully researched decision.  It could be that Woo is making third party themes unusable for their app.  This could be to encourage users to purchase their snazzier apps.    They, like any other app dev is faced with the challenge to make free apps monetize.

I’m still working at resolving the issues with changing themes.  A new header and social share buttons, but those items don’t keep the website from functioning/working in it’s core function.  Ie. Webstore that clearly presents products and provides a selling platform.

This might not be a spreadsheet or financial analysis problem that needs to be solved.  But the interplay of hosting, wordpress, woo commerce and themes all work together to present your website.  Approaching any issues with a sensible plan eliminates problems, creates solutions on a faster timeline, and provides a path to success.  In a field where every website is outdated in three years or less, vendors are always going out of business, and where apps collide, you need to come up with an effective strategy to deal with problems.

If you allow problems to grow from fear of change you will end up with something like this: https://www.boardgamegeek.com/  It’s a website that is devoted to board games.  It has thousands of posters/readers each month.  However, the technology that supports the website is about 10 years too old.  They even have whole threads devoted on how to use the antiquated system.  I did a post and I had to do a search, post in two different threads and to this day, I have no idea if anyone has read it.  Heck, I can’t even find my own post.  They may have thousands of readers; but how many thousands have they driven off?

When you create a new technology solution, you also have to create a solution that will follow it.  Does it allow data to be migrated?  What does that data look like?  Are there new data solutions that on the horizon?

An example of a technology solution that is slowly impacting accounting, is cloud accounting.  It’s easier to get smaller companies to migrate because they have less data to move.  However, as the technology improves, it’s clear that that bank downloads can replace data entry people by the truckload.  Would you implement any accounting system that didn’t have a path to accepting automated bank loads?

Editor’s Note:  I will be presenting at WordCamp Seattle about this issue.

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Why am I independent?

Posted on September 11, 2015 By

I’ve had any number of people ask me this over the now six years that I left corporate america.  I’ve had plenty of answers to that question.  It was a multi-layered reason for leaving.

I knew that there had to be a better option than being in a grey cubicle for 8 hours a day.

I spent hour after hour waiting for work, finishing the work, and connecting with co-workers.  I would go past their cubes and see that they were shopping, reading CNN, or chatting online.  It became clear that I would have perfect the appearance of being busy rather than actually being busy.

I talked to a few mentors before making my decision.  I was told I was crazy for giving up my grey cube just because there was so little to do.  After all, there was a 401(k) and bennies, why should I trade in my window cube?

I love coming up with new workable solutions.

I love working with a variety of people and solving their problems.  It’s something that I enjoyed when helping people resolve their IRS problems.  It’s all in the wording, calculations and grounded in reality.

I like talking to people.

I like hearing the stories that led to prior decisions, current decisions and will lead to future plans.  In corporate america my supervisors mostly did not want me talking anyone outside of the department.  I’ve never been sure why hoarding information to be unloaded at a large meeting is the best outcome.

Girls Scout to the End

I was a girl scout for over twelve years.  Over that time I progressed from an enthusiastic brownie to a senior.  I learned to attack projects with enthusiasm and gusto.  I think it prepared me to be independent.  Selling thousands of girl scout cookies has left it’s mark on me.  You never know what is behind the closed door if you don’t knock on it. 🙂

I’m pretty good at using a tarp to create a shelter too.

Trend spotter

I’ve always been good at spotting data trends, thinking outside of the box, and creating ways to test the financial analysis.  I’ve always been the heavy lifter on teams that created new processes.  How do you down load the data?  What is the report measuring?  How do we create an easy method to capture the information.

In fact, that is why I wrote multiple books on QuickBooks.  I simply couldn’t figure out how anyone would be confused using the program.  It’s pretty straight forward.

Enter sales, download data, code it correctly, shake a bit and you have accurate financials.  Easy Peasy.

 

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Disagree with the Financial Analysis Results?

Posted on September 9, 2015 By

When you receive a financial analysis report or spreadsheet sometimes the results don’t always make sense.  There can be many reasons for that.  The reasons can fall into two camps:

  • The data was flawed.
  • The conclusions from the perfect data were incorrect.

Of course, both items can be incorrect at the same time.  But suggestions on how to fix it should focus on getting the data corrected or more pure will be the only way to fix it.

In the first instance, the data is flawed or in a time worn saying GIGO (Garbage In, Garbage Out.)  Here are some ways to fix that problem.:

Are the basic numbers right?

  • Number of Sales.  I know this seems silly, but you would be astonished how many sales invoices are prepared in QuickBooks that do not have accurate units listed.  Consider if your sales department has been taking shortcuts in preparing the sales invoices.
  • Number of purchases
  • How much did each unit sell for?
  • Are there accruals that are messing with the numbers?
  • Are the comparisons apples to apples or apples to oranges?  An an example would be a software company that sells desktop software and is switching to SAAS software.  If they offered a free month trial, would the SAAS sales numbers be included in the numbers?  What if half the customers canceled after the second month?
  • Christmas returns in retail can be high.  Is it fair to include the gross amount in December if half the products will be returned in January?
  • Overhead incorrectly calculated.  One of my favorite examples is a utility bill.  The clients were coding the utility taxes to local taxes.  So when the cost accountant did their calculation a third of the utility expenses were not in the proper expense account.  I can understand coding it that way, but when it comes to general ledger coding you really need to take a step back and think about what you are trying to accomplish.  Summarizing information in a useful and meaningful way.
  • Delivery and Shipping expenses not accounted for.  At least once a year you should compare the actual shipping cost to what is being charged to the customers.  It isn’t against the law to undercharge the customer for shipping; but it should be done as a strategy, not through sloppiness.

In the second instance, you don’t agree with the conclusions.  They just don’t make sense.  What do you do then?

Blame the messenger.  Perhaps they have noted a problem in your process.  Perhaps they are incorrect.  In this case review their methodology and process.  In other words, review the logic.

Outside economic forces are to blame.  A common example is that on Etsy has many low priced handmade goods.  Knitted sweaters for example.  I have spent some time knitting and know that it take hours and hour to hand knit a sweater.  If we were required to knit our own sweaters, most of us would have only one.  Or half a sweater.  A great hobby, but not economical for retail.  In spite of that obstacle, there are many hand knit sweaters that have affordable prices on Etsy.  So, if someone was an awesome knitter and wanted to sell their goods on Etsy, how will they make a living?  The market has moved the price point down.

  • Sell knitting patterns.
  • Use a knitting machine.  It can create a scarf in an hour vs. a few days.
  • Use cheaper yarn.  Most of the yarn that is for sale is priced for the hobby market.  If you buy from a whole sale yarn provider, the price is lower.  (Hint: wholesales sell cones of yarn.)
  • Outsource the knitting.

I think this is the hardest part of all.  Consider if your opinions are incorrect.

How much money is in question?  Consider that opinions might be formed on a few cents difference.  Consider if that is a material difference.

An example of something that everyone knows something, but it isn’t true is a monthly lease expense vs. location.  Is it better to get cheaper rent?  Or is it better to get a better retail location and pay more rent?  Choosing a retail location is based on demographics, visability, and traffic flow.

So, for instance, you would look at a neighborhood and say, that’s great.  High wage owners, high home ownership rates, and a couple kids per household.  Which describes my neighborhood.  However, business after business dies in my neighborhood.  Why is that?

  • It’s a bedroom community for a large urban area.  60% of the workers commute for an hour or more to Seattle.  Chances are they’ve already completed their errands during their lunch hour.
  • Large malls are located to the north and south of the neighborhood.  The smaller malls have been converted to big box stores.  Mall traffic is diverted away from your smaller retail location.
  • Zoning rules do not encourage businesses.  Buildings are not renovated because of burdensome rules and regulations.  For instance, new buildings need to a certain height.  The precludes developers who need about 10 stories to have have a profitable office building.
  • Since the available office buildings are ‘worn’ they cannot provide a nice shiny alternative to the brand new malls.  Therefore, when consumers judge a business on the building, they choose not to visit because the location isn’t in mint condition.

Given that, would you locate your business in that area?  Or would you be better off paying twice as much for retail location near the newer malls?

Some of the things that might change the underlying business model:

  • Volume changes.
  • Style changes.
  • Market changes.  (Bookstores)
  • Labor cost changes. (Mandated sick pay, increased minimum wages, and benefits.)
  • Ownership payments might be draining the business of needed capital.  More common that you think it would be.
  • Technology shifts.

I will leave you with this final thought.  Perhaps the financial analyst has uncovered a new truth about your business model.  Not all theories remain true under all circumstances.  Perhaps there was a grey area that needed a little more light.

Last week we purchased a new dishwasher at Sears.  The sales person struggled with the tablet and lost wifi service.  So he moved to the cash register.  A register right out of the 1980s, it even had an IBM logo on the terminal screen. He struggled to enter the information.  The credit card did not exist.  And then it did.  He pushed the button to ring the sale.  But the ancient dos system had included the installation charge.  So he voided the sale.  And then he rang it up again.  Whew.  Which was great.  We got home and there was a call from Sears.  Did we really order two dishwashers?

The Sears cost accountants had decided a tablet cash register was great, but didn’t pay for the wifi for it to work, left the old registers there, but the sales system had such a terrible interface that double orders happened.  It wasted a half hour of our time, the clerk’s time, and the warehouse staff time.  That was a fantastic set of cost cutting items that added up to a whole lot of time being wasted. 🙂

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Penciling out a Grant Request

Posted on September 5, 2015 By

This week I’ve been working on getting some grant requests up and running.  I had a few thoughts that I would like to share.  These thoughts aren’t just about this week, but in a theme of issues that I see year round.  🙂

Have clear goal for the grant request.  Is this something that you heard was a money source, or do you have a project that speaks for itself?  It isn’t enough to get money for vague ideas, like save the environment, it needs to be specific.  Like, I’d like to create, distribute materials at the next eco-fair.  Or we would like to create an online information source on a website that already gets thousands of daily site visits.  There are grants that fund operational goals, but your grant request needs to tell a compelling story.

Communication.  This is a challenge in any organization, more challenging in a non-profit.  Put the action item at the top of the email.  When people are volunteering, they are less likely to read a long email with the call to action at the end.

Realistic Goals.  It’s unlikely that your organization will receive a multi million dollar grant unless it has proven that it has successfully completed large projects before.  Creating a doable action plan will reap dividends into the future.

Too harsh?  New for profit businesses rarely scale to millions of sales the first year, either.  Kickstarter millionaires are the exception, not the rule.  Overnight success can happen, however, in most instances, it takes a few years to build to that level.  Part of the pressure to scale a startup should be transferred to making a profit at all startup stages.

Timelines.  Have you communicated a clear timeline for the organization?  I’ve found that people are willing to help if they know that there is a deadline or a process that needs to be completed.

 

 

 

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Start up Inventory For Retail Gift Store

Posted on September 1, 2015 By

Starting up a new gift store can be challenging. One choice is how much product needs to be order. Too little and the customers will keep on walking. Too much and your inventory will sit for months.  Let’s quantify how much is needed for a basic opening amount.

The first step is to map out the retail store.  How many display racks do you have?  What is the space available on each rack?  Do you have sections?  Perhaps a specific area for different price points.  Calculate the exact display space.

If you are having trouble visualizing the display areas, take a page from home decorating experts:

Use graph paper to create a miniature retail space.  Cut out to scale representations of the display racks and move them about.  Remember that most clothing racks will need at least two feet on either side and that there needs to be sufficient room for people to comfortably browse and walk.

If that solution isn’t  working for you, try going to the retail space and use butcher paper and cut out the display rack space.  I find that works best in small or unique retail spaces.

Too much trouble?  Increased customer flow and product placement can have a huge impact on sales.

I think the worst retail experience that I had was at a NASA open house in San Jose.  We were given large checksheets, product were mounted on the wall, and we were supposed to mark what we  wanted and then wait in an endless line for the gift shop items.  To this day, I have no idea where the line started or ended.  There were large do not enter signs and no arrows to get to the cash register line.

It was truly designed to work for the cashier and not the customer.

Design a beautiful space for them to shop in!

Market Conditions:

Take a look at the neighboring stores, competing products and national trends.  Compare your shop to what is also available.  Etsy now has a wholesale division, consider buying some unique goods.

Stocking the store:

Gift shops usually have a wide inventory, but not a deep inventory. Items are usually pre-ordered to be dropped shipped at specific intervals and just before an appropriate season. For instance Christmas inventory might be sent in September so that it could be sold in an appropriate time.

Small drop ships ensure that products do not linger unsold on retail shelves. In addition, small quantities help ensure shopping variety.

On smaller impulse items, such as cash register displays, having a small back room inventory might be prudent.

Create a purchasing plan:

Create an effective inventory tracking program.  Most point of sale software has an option to track inventory.  However, it requires setup and education on how to properly use the software.  For instance, if you didn’t tie it to your cash registers it would not be an effective process since you would have to double enter everything.

It’s worth the few thousand dollars to save money over the life of the retail store.  For instance, if it’s kept up to date, shrinkage and best selling items, become much easier to spot.

Entering the opening information is a burden, but if you do it while the inventory is being physically received, it can lighten the load.

Establish what your safety stock and normal purchasing plan should be. Safety stock is the inventory that you have in the back room.

Clearance area:  Determine what and how much inventory will be in the clearance area.  Remember that some shoppers will only shop there, be sure to have a limited, but still a wide range of deals.

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